Trading the E-mini and other markets during the holidays can be tricky. Markets range can easily range from too little to too much volatility, among other things. To keep you on track this year, here are our top tips for your favorite future, commodity, or currency.
1. Big market movers are often on vacation. The remaining traders can force the market to move erratically. Annual press releases, quarterly reports, earning expectations, and end-of-year summaries can further drive these random fluctuations.
2. During the holiday season, count on half-days and holidays. On half-days, the markets tend to move slower and may catch you off-guard with an unexpected closure. Be aware of these dates:
Thursday, November 26, 2015: Markets close early at 1:00 p.m. EST and reopen at 5:00 p.m. EST
Thursday, November 27, 2015: Markets close early at 1:15 p.m. EST
Thursday, December 24, 2015: Markets close early at 1:15 p.m. EST
Friday, December 25, 2015: Markets closed
Thursday, December 31, 2015: Normal trading day
Friday, January 1, 2016: Markets closed
…As usual, the markets are closed on Saturday. Markets reopen on Sundays at the usual time.
3. Be aware of FOMC (Federal Open Market Committee) dates, as volume thins and price moves in small channels. These dates are December 15 and December 16.
4. Remember the ATR (Average True Range) can be used to gauge volatility as well as determine profit targets and stops. Use a period value of 4 to get a good, real-time understanding of expectations. Stay away when the ATR is below 1 point and above 5 points.
5. With holiday spending at its peak and traders eyeing taxes, many traders will enter and exit large positions. This activity can create unexpected movement in the markets.
6. Markets often rise durign this time of year. Remember this especially with long-term positions. We have talked about the Super Year and expect this to be the case. Your intraday trading, however, may be a bit slower than normal, so prepare for this to reflect in your monthly reports.
7. The holidays are best spent with your family. If your trading is troubling, take a break and spend time with those you love.
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Here we are in mid-November. You may recall our previous 2015 Super Year videos that said the market would trend bullish by the end of 2015. As price climbed, new highs were met. With these new highs, we have new trading opportunities. Super Years – that is years ending in “5”, tend to perform bullishly.
What’s the market going to do now? What’s going to happen?
To demonstrate, John Paul uses a NinjaTrader daily chart and the December 2015 E-mini contract. With any good trading method, you must use specific rules. John Paul looks for the previous highest high (2110.50) and waits for a pullback (price dropping for about four consecutive days). Should you go long now? Not unless the trade validates. How does it validate? Take that recent high and the most recent lowest low. Then use the NinjaTrader Fib tool with a setting for 0%, 50%, and 100% to easily see where price needs to break the 50% level to validate the trade, so you can go long. Watch the video to see how he uses the Fib tool to accomplish this.
As a reminder, the next eight week Group Mentorship Program begins Dec. 8, 2015. Classes are twice a week: Tuesdays and Thursdays from 3 p.m. to 4 p.m. EST (New York Time). You will be coached live by John Paul on all of our trading action trading methods (about 10 total). All courses and software are included with lifetime licenses. Space is limited, so register early and get the first week’s ATO course and software ahead of time. Click here for information.
A new Group Private Mentorship class begins Dec. 8, 2015. Eight weeks of live training with John Paul will teach you everything you need to know to successfully trade futures and currencies. All courses and software are included with lifetime licenses. This new session has classes twice each week.
We expect this new session to fill up quickly. It’s a good idea to reserve your seat as soon as possible.
Click here to submit your $500 deposit. This deposit secures your seat and provides you with the first week’s materials ahead of time. You’ll be able to receive the ATO course and software for NinjaTrader right away!
• Live coaching with Day Trade to Win founder John Paul
• Atlas Line® software with lifetime license
• Roadmap method with lifetime software
• Blueprint method (as taught in Power Price Action)
• X-5 method (as taught in the Floor Trader Secrets Manual)
• At the Open (ATO) Course with lifetime software
• Trade Scalper Course with lifetime software
• Price Action Scalping Course with lifetime software
• ABC Pattern with lifetime software
• How to Filter Trades
• How to Trade the News
• How to Set Up Your Charts
• How Manipulation Works
…plus much more!
High frequency futures trader, Michael Coscia, has been found guilty on 12 accounts of fraud for “spoofing” market activity. He manipulated prices on the Chicago Mercantile Exchange by placing large, unfilled orders (spoofing) and placing smaller orders that were filled. He effectively created deficits in the market, allowing him to temporarily have some control over price in a specific direction. Predictable movement became quite profitable for Coscia.
Spoofing is an illegal practice. Corscia’s case was the first test of anti-spoofing law introduced by the 2010 Dodd Frank Act. High frequency and institutional traders watched the case closely to see if the law was even enforceable. This case is a landmark with potential use against others suspected of similar market deception.
Nine weeks of spoof trading CME futures markets in 2011 earning Coscia’s company $1.9 million. By flooding the market with huge orders that were never intended to be executed, his computer program was able to act within a few thousandths of a second to take advantage of the spoofs. Regular, small profits became a lucrative business.
Coscia’s defense attorney stated his client was clever, called his actions victimless, and suggested the large companies were at fault for their losses. Jurors needed only one hour to unanimously convict Coscia of illegal “bait and switch” tactics. He now faces up to 25 years in prison.
Experts believe Coscia was not a lone wolf – many more spoof traders are believed to be out there.
What do you think?
Thursday, September 10, 2015 is the day to roll over your equity index futures. If you trade the E-mini, you can roll over your contract to the next contract period, December 2015 (ES 12-15 in NinjaTrader). It is customary to roll over the futures contract eight days before the contract expires. This is known as the roll date. The next roll date will be December 10, 2015.
Click here to see the CME page with an explanation and future dates
Click here to see the official rollover instructions from NinjaTrader
The way we roll over futures contracts is as follows. As long the current day is the roll date or you are rolling afterwards, NinjaTrader will know the contract contract to use for any given market at any given time. To roll over:
1. Go to NinjaTrader’s Control Center > Tools > Instrument Manager.
2. In the name box (top center of the Instrument Manager), type in the abbreviation for the market you want to roll over, e.g. ES. Click Search.
3. In the result box, click the correct market and the row will highlight. Notice below how NinjaTrader knows to set the Expiry date to the correct value (12-15 in this case). Click the left black triangle / arrow button so that the new ES contract is added to the list on the left. Then click OK. Optionally, you can click the old contract and click the right arrow/triangle button to remove it from the list.
From this point forward, you can open a new chart for the new contract period or switch over your current chart by using the drop-down list in the upper left corner of the chart.
» Get the Trade Scalper Signals «
In this video, John Paul uses the Trade Scalper method live on the E-mini S&P. A small profit target and stop loss are used multiple times throughout the day. For this specific 1-min E-mini chart, he uses a 3 tick profit target and a 6 tick stop loss. The ATM strategy automatically places the target and stop. He enables the TextAndMarker setting so you can see the exact price at which he entered. The Trade Scalper method is fully explained – it’s not black box. The course provided after purchase fully discloses how to find these trades on your own manually, so you do not have to depend on the Trade Scalper software. The Trade Scalper software gives you entry signals and arrows to show you exactly where you should enter. His short trade gets tagged and filled very quickly, even for scalping. Coincidentally, the Atlas Line on a 5-min chart was providing additional confirmation to go short. Some traders use both methods like this for better trading. Remember, if you want to learn all the methods in one package, the eight week Mentorship Program is the best option – click here for details.
» Get the Atlas Line Signals «
John Paul adds the Atlas Line to his July 31, 2015 E-mini S&P chart to show you the live trades the software produces. The signals that you see in the video are the same for all Atlas Line users. Typically, he uses between 8-12 contracts, depending how comfortable he is with the market conditions. In this trade, the ATR was around 3 points. We like to use pre-configured ATM strategies because they allow quick selection of a commonly used profit target and stop loss. It’s very important to always have a profit target and stop loss in mind, otherwise you open yourself up to emotional decisions instead of price objectivity. The Long signal was given for 2100.75. The profit target and stop loss John Paul uses is based on what current market conditions can provide (as indicated by the ATR). Many traders use a fixed profit and risk strategy, which can get them into trouble. We have plenty of videos that explain exactly why John Paul uses certain profit targets and stops. For this trade, the profit expectation is around 10 to 12 ticks (based on the ATR). The stop, also based on the ATR, is double. Scary, right? But this is only a safety net in case there’s a sudden, and unlikely, catastrophic event. If the profit target does not get hit, we will most likely get out at a smaller loss, break even, or even small profit. You’re taught how to do these other stop strategies in the included live training session. Keep in mind that John Paul is fast-forwarding this video. The BarTimer normally counts down second by second, but you can see it’s sped up in order to show what occurred with the trade more quickly. This trade was good for +2.75 points.
The E-mini S&P, also called S&P E-mini, or simply E-mini, is an index futures security offered by the CME Group and regulated by the CME (Chicago Mercantile Exchange). The E-mini is considered a benchmark of US stock market performance because it consists of various Standard and Poor’s 500 large-cap stocks. On the news, you may see the S&P and wonder how it’s related to the E-mini. Essentially, the E-mini is 1/5 the full S&P that you see on the news. As a futures market, E-mini contracts expire every three months. A new contract is then traded.
Why do people trade the E-mini?
- Low trade costs and greater leverage compared to typical ETFs or stocks (as low as $300 to $500 in some cases, but we recommend a minimum of $4,000 to absorb consecutive losses and learning)
- Minimal bid-ask spread
- Can be traded via buying or selling (short or long)
- Good liquidity and size
- Fast trade executions because the market is entirely electronic
- Regulated by the U.S. CME
The smallest increment on an E-mini chart is called a tick. Each tick is worth $12.50. There are four ticks to a point. Therefore, a point is worth $50. Brokers typically charge less than $5.00 to execute (in and out, also called “round-turn”) each trade. This $5.00 is multiplied by the number of futures contracts being traded. Putting this all together, if you trade one contract and make a profit of 16 ticks, this equates to 4 points, or $200. Since this is one contract, your broker will take about $5.00 from that trade, so you’re left with $195. If you trade two contracts, your profit is $400 before commissions and $390 after commissions. Remember that contracts act as a multiplier.
The E-mini consists of quarterly contracts: March (ESH), June (ESM), September (ESU), and December (ESZ). Some trading platforms, such as NinjaTrader omit the contract month and denote the numerical month value instead. For example, the March contract becomes ES 03-15. On platforms like TradeStation, a trader can specify @ES to monitor price over all contract periods without having to “roll over” to a different period.
Other popular futures markets include the DOW (YM) NASDAQ (NW) and the Russell (TF).
At Day Trade to Win, we focus on intraday trading, which means we look for trades from market open to market close. We do not typically hold positions overnight, and this should certainly be the case for any traders who are trading on margin. In most cases, we hold trades no longer than 20 minutes. We are out of a trade sooner if we make profit via price hitting our profit target or if a stop loss is hit. A stop loss is a safety net price from which you will exit at a loss if price reaches it before hitting your profit target. Our stop loss and profit targets are mostly dynamic and based on market movement. Our trading methods make sense because we trade based on what a given marked can realistically provide.
To avoid costly mistakes beginner traders make, join our next Group Mentorship Program.
Yesterday, our support team received the following email from Danny in Niagara Falls, Canada. He had some questions for John Paul regarding the ABC method. See Danny’s email and John Paul’s response below.
Thanks for the kind words and glad you are enjoying the videos. I’ll try to put some new ones out soon. See my explanation and chart examples from yesterday.
The ABC Method can be very helpful in both finding entry opportunities and determining whether there’s a trend. In the charts below, US/Eastern time (currently EDT or UTC-4) is used. Remember to adjust if your time zone is different.
With the ABC Method, think about splitting the trading day into three periods. The trading section can begin at the U.S. market open at 9:30 a.m. US/Eastern or the London market open at 3:00 a.m. US/Eastern.
We’ll start with one vertical line at 9:30 US/Eastern followed by another vertical line at 12:00 p.m. US/Eastern. This is a 2.5 hour period. You can consider this a range, as it contains a highest high and lowest low of all data (candles) within 9:30 a.m. to 12:00 p.m. This is the A period.
If within the next (B) period, two 5-min candles close above or below the range of the A period, you can go either Long or Short on the close of the second candle. This must occur within the first 1.5 hours (by 1:30 p.m. US/Eastern) of the B period to be valid. Trending days usually break the A period.
The A Period
The B period begins with the same line you drew at 12:00 p.m. US/Eastern (the end of the A session). Remember to add a new line at 2:30 p.m. US/Eastern to conclude the B period. Yes, the B period is also 2.5 hours in duration.
The B Period
The same relationship occurs when comparing period B and period C for potential late-day rallies and breakouts. The C period needs to show two consecutive 5-min closing candles above or below the B range within the first hour of period C.
The C Period
The same relationship occurs during the London session A period, starting at 3:00 a.m. US/Eastern through 5:30 a.m. US/Eastern (2.5 hours). Then the B period occurs from 5:30 a.m. US/Eastern through 8:00 a.m. US/Eastern (2.5 hours). Then the C period occurs from 8:00 a.m. US/Eastern through 9:30 a.m. US/Eastern (only 1.5 hours).
The London Trading Session
Hopefully this clears up your understanding of the ABC method and how it can work with European markets. Remember that switching your cursor to a crosshair will help you easily identify the times on the time axis. Your profit target and stop loss should be relative to the volatility.
The best way to learn more about the ABC and all of our other trading methods is with our eight-week coaching program called Mentorship. Click here to find out more.
This week, the U.S. Department of Justice arrested trader Navinder Singh Sarao, who is believed to be partially responsible for the May 6, 2010 Flash Crash. U.S. prosecutors believe Singh weakened markets through manipulation to cause 2010’s 15 minutes of financial free fall chaos that brought the world’s biggest markets to their knees. His arrest has left regulators and investors very concerned.
How can one person have such influence? Sarao allegedly employed a technique called “spoofing” and “layering.” By placing and removing thousands of orders on the E-mini worth tens of millions of dollars over hundreds days outside the range of market price / execution, it is believed he was able to reduce the price of E-mini futures. Once price dropped and became imbalanced by the cycling of his algorithm during the trading day, he was able to sell contracts ahead of declines and buy them back before anticipated recovery.
On the day of the Flash Crash, prosecutors claim Sarao created vulnerability in the market by repeatedly placing large orders over several hours. It is said he caused close to $200 million worth of downward pressure on the E-mini S&P, thereby representing up to 29% of sell orders. A large trade from an unknown U.S. investor then contributed in causing the crash. As a result, other markets such as the Dow Jones industrial average, began a virtual free fall. The Dow dropped nearly 600 points in minutes. Eventually, the major indexes recovered. However, the confidence of ordinary Americans was shaken. In addition, the event has brought scrutiny to the nature of electronic trading and regulation; particularly that of high-frequency trading and the effectiveness of said regulation.
Over his five-year manipulative trading career, it is believed that Sarao made $40 million. During this time, the Chicago Mercantile Exchange (CME) tolerated Sarao’s alleged manipulation and market destabilization. As a direct result of the Flash Clash, $879,018 is his estimated profit.
Currently, Sarao is awaiting extradition. He was arrested by British authorities on Tuesday. The CFTC is seeking, “disgorgement, fines, and trading suspensions” related to wire and commodities fraud among other counts. His arrest was largely due to a private whistle-blower’s detective work and financial analysis of the Flash Crash, which was provided to the CFTC.
A month before the crash, Sarao created a corporate entity in the Caribbean called “Nav Sarao Miling Markets.” Also before the crash, the CME had questioned him about his trading activity. In response, Sarao called the exchange, and in an email to his own broker describing this, he told the exchange “to kiss my ass.”
What do you think?